Property price increases haven’t kept up with salary growth, which means that people have had to borrow increasingly more to get into property. And, there is only so much you can stretch a stagnant salary…
The property market is a risky business.
As Australia’s housing bubble is set to burst again, experts predict that house prices in Australia’s biggest cities will fall by 5–10% in 2018–2019, with Melbourne and Sydney most at risk.
The Property Market: A Good Investment?
The GFC pushed the US property market into a nosedive, which in turn had a flow-on effect on Australia’s economy.
And yet our housing market never experienced the kind of crash that the US and others did. This means that Australian house prices have continued to march steadily upward, making them some of the most expensive in the world.
For years, the mainstream media and popular culture in Australia have pushed the idea that house prices are immune to the laws of economics, and simply cannot fall.
But recently, more and more economists are becoming concerned that Australian property is in a bubble, and ripe for a fall.
In spite of this reality, property remains a popular and sound investment in the long term. And while property investment is not without its risks, property is often seen as a ‘stable’ option which yields better results over time.
However, it may be that 30 years of house price rises have locked many people out of the market for good.
At present, the market is overwhelmingly affected by low interest rates and a poor supply of housing, cause by an increased demand by our rising population. With our population expected to grow, foreign buying is also having an impact, with a 5–10% demand hitting the most popular areas.
It is expected that the continuing cycle of supply and demand will act as a driving force in the future market.
Young people are particularly affected by the Australian slump in housing affordability.
During the last 20 years, house prices in Sydney have gone from an average price of $233,000 to $2,000,000 — a five-fold increase. Melbourne has not fared much better, with the average price rising from $142,000 to $943,100.
At this rate, only the wealthiest will be able to afford such an investment, and this divide is contributing to a widening of the gap between rich and poor.
The slowing in Melbourne and Sydney’s property markets, and a decrease in lending to investors, will have an impact on future growth.
While property remains a long-term investment, it may be that investors are wary of the eventual fall.
To get in the know on the potential in property investment, check out our articles below.
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